Four years ago, credit scoring had little to do with
mortgage lending . When reviewing the credit worthiness of a borrower, an underwriter
would make a subjective decision based on past payment history.
Then things changed.
Lenders studied the relationship between credit scores and
mortgage delinquencies. There was a definite relationship. Almost half of those borrowers
with FICO scores below 550 became ninety days delinquent at least once during their
mortgage. On the other hand, only two out of every 10,000 borrowers with FICO scores above
eight hundred became delinquent.
So lenders began to take a closer look at FICO scores and
this is what they found out. The chart below shows the likelihood of a ninety day
delinquency for specific FICO scores.
FICO Score
odds of a
delinquent account
595
2.25
to
1
600
4.5
to
1
615
9
to
1
630
18
to
1
645
36
to
1
660
72
to
1
680
144
to
1
700
288
to
1
780
576
to
1
If you were lending a couple hundred thousand dollars, who
would you want to lend it to?
